Amazing salary hike for CBSL: Abusing the privilege to fill one’s own plate?

The recent huge and unparalleled salary increase taken upon themselves by the Central Bank of Sri Lanka (mis)using the independence given by the International Monetary Fund (IMF) to its staff has dumbfounded the entire nation.

According to the sources attributed to the Central Bank of Sri Lanka (CBSL), the justifications for the increase were that the remunerations of the staff of CBSL were not paid out of the consolidated fund, its recent independence given by CBSL Act, No. 16 of 2023 could not be subject to question by anyone, such a hike was needed to control the brain drain and to suit the salary benchmark of other financial institutions, and it was as per the triennial collective agreement.

According to this salary scale for CBSL, it was better for a Commissioner General of Inland Revenue, which contributes nearly 50% of the government’s annual revenue, to get recruited to a clerical position at CBSL. Even higher-ranking judicial officers and special-grade administrative officers had better get an appointment at CBSL, at least as clerks.

The country is still reeling from this shockwave of unprecedented and immoral salary hikes taken by the staff of CBSL, while it has failed and bankrupted the country by aiding and abetting corrupt and short-sighted politicians, despite the excuses it uttered.

CBSL is legally or morally not entitled to increase its salaries

It is not a secret that CBSL was directly and indirectly accountable and responsible for the past and present economic crisis, the bankruptcy, and the untold sufferings the people of the country are undergoing due to its failure to perform its expected duties and responsibilities. 

This obvious fact was confirmed and established by the recent judgment given on 14.11.2023 by the highest court in the country.

The primary and fundamental objects of a central bank in any country are the achievement and maintenance of Domestic Pricing Stability and Financial System Stability.

Price stability is crucial for economic growth and overall well-being. Moderate inflation encourages spending and investment, while hyperinflation can disrupt economic activities, erode purchasing power, and create uncertainty.

Financial System Stability is essential for economic development and prosperity. The central bank works to prevent disruptions such as bank failures, market collapses, or systemic crises that could lead to a breakdown in the financial sector. This involves monitoring and regulating financial institutions, managing systemic risks, and providing a secure environment for financial transactions.

Independence of CBSL and intervention of the IMF

I am pretty sure the IMF would be wondering why it had stipulated in its Extended Fund Facility (EFF) that CBSL should be more independent without knowing the mentality and attitude of Sri Lankans.

The independence of a central bank is indispensable for the development of a country, especially in Sri Lanka, where uneducated politicians take the decisions and dictate the policies to the officials.

The irony of the independence granted to CBSL through its recently passed CBSL Act, No. 16 of 2023, as a part of the EFF of the IMF was the creation of a negative view among politicians and the public alike on the much-needed independence of CBSL.

The impression created through this incredible and unparalleled salary hike taken by CBSL immediately after the additional independence was that CBSL is not accountable to anyone and that it is above the law of the country.

Salary hikes at CBSL and its immorality

The little credibility gained by CBSL in the recent past through its articulate and cool Governor (who had reportedly declined the salary hike) had turned upside down overnight. The media, especially the social media, began to ridicule and criticise the unethical and unilateral measure taken by CBSL to increase the salaries of its staff in the name of a collective triennial agreement.

“What is legally right is not necessarily always morally correct.”

I still vividly remember once a journalist dumbfounded the eloquent President J. R. Jayawardene by the above-mentioned quote when the latter justified the controversial 1983 referendum on the basis of its legality.

I too wish to remind the eloquent governor of CBSL that such a salary hike taken by CBSL staff may be legally (?) right as per the triennial collective agreement, but it is not definitely morally correct due to the following reasons:.

• Part of the problem: CBSL was an integral part of the unprecedented present economic crisis the country has fallen into. Had CBSL performed its due duties properly during the last seven decades, none would have uttered a word against it, and this salary hike would not have been “unparalleled,” as many other public and private sector employees would have been enjoying similar hikes and scales.
  
   
• Independence misused: Independence given to CBSL through CBSL Act No. 16 of 2023 was primarily to sustain and achieve the fundamental objectives of domestic pricing and financial system stability of the country and not to increase its salaries at its whims on the pretext that it is independent. I am sure the IMF might be putting its tail between its legs for the folly of independence; it is strongly recommended for CBSL.
  
   
• Privileges abused: It is true that CBSL has some specialised duties and functions to perform towards the development of the country, as every other profession and vocation have to perform. Every profession and vocation are unique and special, and each person belonging to such a profession and vocation considers himself or herself a VIP and indispensable.

The sense of having such privilege does not give a legal right to such a body of persons or institutions – simply because it is answerable to none - to take arbitrary and unilateral decisions that may have adverse impacts on other sectors.

Already, this salary hike had alarmed the trade unions, which were agitating not for Rs. 100,000  increases but for Rs. 10,000  increases for their members. Payment of such an increase would destabilise domestic pricing stability, and non-payment of the increase would destabilise the morale and productivity of the working forces. 

•  Brain drainage: Due to the bankruptcy and economic crisis jointly created by the political authority and officialdom of CBSL, not only the professionals of CBSL leave the country; any human being (white-collar or blue-collar) capable of leaving the country will try their best to flee the country. In the last few years, hundreds of life-saving specialists and medical professionals have left the country for green pastures.

As per the salary hike, a clerk at CBSL draws more than a doctor at a government hospital. So such a salary hike further deteriorates the income disparity and augments the exodus of other skilled and unskilled laborers. So an unreasonable salary hike given to one sector creates more problems than solutions.

• Practice what you preach: It is evident that CBSL has given the world the wrong signal by its stupid action of hiking its salaries incredibly within two months of getting the independence of the CBSL Act while preaching others—domestic and foreign sovereign bond holders—who are legally entitled to get their dues on maturity of the bonds to agree to the debt restructuring process due to the bankruptcy and economic crisis of the country to which CBSL too was a party.

It was attributed to the Minister of Justice, Dr. Wijeyadasa Rajapakshe, that the CBSL, as the institution responsible for the downfall of the economy, was wrong in taking the arrogant decision to increase its salaries. He regretted giving (independence) power to CBSL through the new act, as CBSL was the institution that had the biggest responsibility for the economic crisis as it had avoided performing its duties.

I wish to conclude this article with the statement purportedly attributed to the last governor general of the British emperor that Sri Lankans were not yet mature enough to get their independence and rule it.

If the statement were true, I would dare to say that even after 75 years of independence, Sri Lanka is not yet mature enough to take over independence positively, as the prosperity of the country is in constant decline and downfall for which we all as the politicians, electors, and public officials are responsible.

(The writer is a retired Deputy Commissioner General of the Inland Revenue Department and could be reached via email [email protected])